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More online retailers are offering free shipping as customers
come to expect it. Last year, more than half of all online
transactions during the holidays included shipping at no charge,
a 10 percent jump from 2010, according to a survey of online
shoppers by comScore.

While you may need to offer free shipping
-- at least as a promotional feature during the holidays -- to
retain and attract customers, don’t jump into it too quickly.
Here are five mistakes to avoid when offering free shipping to
your customers.

1. Assuming free shipping is your best promotional
offer: While free shipping is often touted as the best
way to lure customers, other promotional offers might help your
business even more. David Kravetz, cofounder of Fairytale Brownies, a
Phoenix-based baked goods company, began offering free shipping
in 2005. But two years later, he decided to do an experiment. He
made two different offers to customers -- either 20 percent off
their total purchase or free shipping -- and was surprised that
almost twice as many customers chose the discount. Even better,
Kravetz says, those customers bought more because they wanted to
increase their savings.

2. Going into free shipping whole hog: Small
businesses make a huge mistake by offering free shipping year
round or for all purchases regardless of price, says Chris Malta,
an Orlando, Fla.-based shipping expert. "People think, 'If I'm
not making sales now, there must be a magic switch I can turn
on,' and they think that it's free shipping. They go from nothing
free shipping to everything free shipping." Instead, Malta
recommends starting out with a limited-time offer on free
shipping that will entice customers to buy. For example, every
six to eight weeks, Kravetz offers free shipping deals that last
only about three days. He also sets a minimum threshold so
customers get free shipping only if their purchase totals $35 or
more. "If you send a $15 item [free of charge], you can really
lose money on the order," he says.

3. Making your minimum threshold too high: While
free shipping on small purchases can eat away at your profit
margin, it’s a mistake to set your minimum qualifying purchase
price too high, says John Lawson, an Atlanta-based e-commerce
consultant. He recommends figuring out your average order size
and making your minimum threshold 10 or 15 percent higher to
encourage customers to buy a little more than they normally
would. For example, if your average order is $20, consider making
the minimum purchase eligible for free shipping $25 rather than,
say, $50 or $100. "If no one ever orders from you for $100,
that's not realistic," Lawson says.

4. Touting free shipping as your main marketing
message: Retailers often rely too heavily on free
shipping to sell their products. While you should certainly make
"free shipping" a prominent element of your home page, don’t
overdo it and drown out important messages about your brand and
specific products. "You are selling the product, you are not
selling free shipping," Malta says. "Every product has to have a
consistent message that goes with their branding. …When you
overstate something like free shipping, it just takes away from
everything else." Kravetz, whose website is filled with large
flashing photographs of brownie gift boxes, also warns against
trying to compete on free shipping alone: "I don't want to be the
company that people come to because of free shipping."

5. Failing to remind customers how much they're
saving: Once you've made free shipping part of the
deal, be sure to let customers know exactly how much they are
saving, says Matt Silvers, CEO of seo4anyone.com, a Miami-based
Internet marketing company. Most online shopping carts
automatically calculate shipping fees, so customers can see how
much they would have spent without the freebie. "That's another
validation for the customer to buy," Silvers says. "It goes from
a perceived savings to an actual quantitative savings in the
customer's mind."